Termination Agreement

TERMINATION
AGREEMENT, dated as of December 15, 2004 (this Termination Agreement),
among Aquila Merchant Services, Inc. (as successor to Aquila Energy Marketing Company), a
Delaware corporation (AMS), Aquila, Inc. (formerly known as UtiliCorp United
Inc.), a Delaware corporation (ILA and together with AMS, Aquila),
St. Paul Fire and Marine Insurance Company (the Surety), and the American
Public Energy Agency, a political subdivision of the State of Nebraska (APEA).
Capitalized terms used herein and not otherwise defined are used as defined in the
Agreement (as defined below).

W I T N E S S E T H

WHEREAS,
Aquila and APEA entered into that certain Gas Purchase and Sale Agreement dated as of
October 6, 1998 (as amended to date, the Agreement) under which Aquila
agreed to supply APEA with fixed quantities of natural gas on a monthly basis through
October, 2010 in exchange for a single advance payment by APEA;

WHEREAS,
to secure the obligations of Aquila under the Agreement, Aquila delivered to APEA an
Advance Payment Surety Bond, Bond No. 400JY 1330 issued by the Surety, in the
original penal sum of One Hundred Seventy One Million Eight Hundred Ninety Three Thousand
Eight Hundred Sixty Eight and no/100 Dollars ($171,893,868.00) (the Surety
Bond);

WHEREAS,
by Rider dated October 4, 2002, National Indemnity Company (the
Co-Surety), was added as a co-surety on the Surety Bond;

WHEREAS,
each of ILA and APEA have entered into a swap confirmation (the ILA Swap and
the Swap respectively and collectively, the Swaps) with Canadian
Imperial Bank of Commerce (CIBC);

WHEREAS,
Aquila has ceased making deliveries of natural gas under the Agreement beginning
November 1, 2004, resulting in a Seller Deficiency Default as defined in the
Agreement;

WHEREAS,
APEA has demanded that Aquila continue deliveries under the Agreement, and has not acceded
to the cessation of deliveries;

WHEREAS,
Aquila has informed APEA that it will not resume deliveries under the Agreement;

WHEREAS, by
letter dated November 23, 2004 APEA gave notice to Aquila that a Triggering Event
resulting in early termination (the Early Termination) of the Agreement
had occurred and designated December 15, 2004 as the termination date of the
Agreement (the Early Termination Date).

WHEREAS,
the Parties wish to execute this Termination Agreement to confirm the amounts to be paid
by the Parties in connection with any Early Termination, and address the procedures to
effectuate the Early Termination.

NOW,
THEREFORE, in consideration of the above premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties
agree as follows:

1. Incorporation
of Recitals. Each of the Recitals set forth above is hereby
incorporated in this Termination Agreement.

2. Termination
of Agreement. Aquila acknowledges that APEA has sent written
notice to Aquila in the form and at the time provided in Section 4.1
of the Agreements, and the Parties agree that the Agreement shall
terminate December 15, 2004.

3. Payments.
The Parties agree that the following payments shall be made on or
before Early Termination Date in accordance with the procedures described
below.

(a)

(i) The Parties agree that the Termination Payment due under the Agreement on
the Early Termination Date is $139,087,342.

(ii)

APEA
will submit a demand for payment to the Surety, as provided in the Surety
Bond, for payment of the Maximum Penal Sum as defined in the Surety
Bond (the Penal Amount) on the Early Termination Date. As
of December 15, 2004, the Penal Amount will be $137,051,115.

(iii)

The
Surety shall make payment of the Maximum Penal Sum in immediately available
funds on or before 5:00 p.m. (EDT) on the Early Termination
Date.

(iv)

Upon
receipt of the Maximum Penal Sum, the Surety Bond shall cease to be of
further effect. APEA shall cause the original Surety Bond to be
redelivered to the Surety immediately.

(v)

Aquila
shall make a payment of $2,036,227 in immediately available funds on or
before 5:00p.m. (EDT) on the Early Termination Date, representing the
balance of the Termination Payment after giving effect to the payment
of the Maximum Penal Sum by the Surety.

(b)

Aquila
shall pay to APEA on the Early Termination Date the amount provided under
Section 5.02 of the Agreement for Seller Deficiency Defaults (the
Deficiency Payments).

(c)

APEA
will make the swap payments provided for in Section 4(a) hereof on the
Early Termination Date.

(d)

Aquila
will pay to APEA the amounts specified as Market Exposure Damages under
the Market Exposure Damages Agreement, dated September 13, 2004
between APEA and Aquila (the MED Agreement).

4. Swap
Payments and Market Exposure Damages.

(a)

APEA
shall pay or cause to be paid $9,300,620 to CIBC in immediately available
funds for amounts owing under the APEA Swap for the months of November and
that part of December through December 15, 2004. Notwithstanding any
provisions in the APEA Swap to the contrary, such payment shall be made to
CIBC on or before 5:00 p.m. (EDT) on the Early Termination Date.

(b)

On
or prior to the Early Termination Date, Aquila and APEA will execute the
termination letters issued by CIBC and the Termination Agreement
confirming the closeout terms of the Swaps. APEA will assign to CIBC its
right to receive Market Exposure Damages under the MED Agreement, in lieu
of any payment by APEA upon early termination of the APEA Swap.

(c)

Aquila
shall calculate Market Exposure Damages pursuant to the MED Agreement.
Notwithstanding any provisions in the MED Agreement to the contrary, APEA
and Aquila agree that the Market Exposure Calculation Date shall be the
same date as the early termination calculation date for the Swaps, which
has been designated by CIBC as December 15, 2004,and that the
amount of the Market Exposure Damages shall be identical to the early
termination amounts under the Swaps.

5. Confidentiality;
Public Statements.

(a)

No
Party nor any of its successors, assigns or subsidiaries or any of their
respective officers, directors, advisors (including financial advisors),
employees, representatives, attorneys or agents shall publicly make,
directly or indirectly, any disparaging or negative statements concerning
any other Party or any of its successors, assigns, subsidiaries or
affiliates or any of their respective Related Parties.

(b)

Except
as required by (i) applicable law or rules of any relevant securities
exchange, or (ii) any requirements under federal or state law with
respect to disclosure for the Bonds or other indebtedness incurred by or on
behalf of APEA, or (iii) any requirements under Nebraska public
meeting or public records laws, or (iv) an order of any court or
regulatory authority of competent jurisdiction, no Party may, directly or
indirectly, make or cause to be made any subsequent public announcement or
press release or issue any subsequent public notice regarding the subjects
of such press release without the prior written consent of the other
Parties.

6. Cooperation
and Further Assurances. The Parties shall cooperate with each other to
execute such further instruments, documents and agreements and give any
further written assurances as may be reasonably requested by any other
Party to evidence and reflect the transactions contemplated hereby and to
carry into effect the intents and purposes of this Termination Agreement.

7. Representations
and Warranties of APEA. APEA represents as follows:

(a)

Organization.
APEA is a political subdivision of the State of Nebraska organized and
existing under the laws of the State of Nebraska and has full corporate
power and authority to carry out the terms of this Termination Agreement.

(b)

Authorization,
etc. APEA has full power and authority to enter into this Termination
Agreement and to perform its obligations under this Termination Agreement.
The execution, delivery and performance by APEA of this Termination
Agreement and the consummation by APEA of the transactions contemplated by
this Termination Agreement have been duly authorized by all requisite
corporate action on the part of APEA.

(c)

Execution.
This Termination Agreement has been duly executed and delivered by APEA
and constitutes the legal, valid and binding obligation of APEA,
enforceable against APEA in accordance with its terms, except as limited
by laws affecting the enforcement of creditors rights generally or
by general equitable principles.

(d)

Consents.
No authorization, approval, consent, or order of, or a registration or
filing with, any court, governmental agency, or other third party is
required on the part of APEA for the execution, delivery, and performance
of this Termination Agreement.

(e)

Conflicts.
The execution, delivery and performance of this Termination Agreement by
APEA (i) will not violate any law or regulation applicable to it or
any order, writ or decree of any court or governmental agency by which it
or any of its property is bound, (ii) will not violate any provision
of the governing documents of APEA; and (iii) will not violate or
constitute a default under any material agreement to which it is a party
or by which or any of its property is bound.

8. Representations
and Warranties of AMS and ILA. AMS and ILA, jointly and severally,
represent as follows:

(a)

Organization.
AMS is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. ILA is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Delaware.

(b)

Authorization,
etc. Each of AMS and ILA has full power and authority to execute and
deliver this Termination Agreement and to consummate the transactions
contemplated by this Termination Agreement and to perform its obligations
under this Termination Agreement. The execution, delivery and performance
by AMS and ILA of this Termination Agreement and the consummation by AMS
and ILA of the transactions contemplated by this Termination Agreement have
been duly authorized by all requisite corporate action on the part of each
of AMS and ILA and no other corporate proceedings on the part of AMS or
ILA are necessary to authorize this Termination Agreement or to consummate
such transactions.

(c)

Execution.
This Termination Agreement has been duly executed and delivered by AMS and
ILA and constitutes the legal, valid and binding obligation of AMS and
ILA, enforceable against each of them in accordance with its terms, except
as limited by laws affecting the enforcement of creditors rights
generally or by general equitable principles.

(d)

Consents.
No authorization approval, consent or order of, or a registration or
filing with any court, governmental agency, or other third party is
required on the part of Aquila for the execution, delivery, and performance
of this Termination Agreement.

(e)

Conflicts.
The execution, delivery and performance of the Termination Agreement by
Aquila (i) will not violate any law or regulation applicable to it or
any order, writ or decree of any court or governmental agency by which it
or any of its property is bound, (ii) will not violate any provision of
the governing documents of Aquila; and (iii) will not violate or
constitute a default under any material agreement to which it is a party
or by which it or any of its property is bound.

9. Representations
and Warranties of the Surety. The Surety represents as follows:

(a)

Organization.
The Surety is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Minnesota.

(b)

Authorization,
etc. The Surety has full power and authority to execute and deliver
this Termination Agreement and to consummate the transactions contemplated
by this Termination Agreement and to perform its obligations under this
Termination Agreement. The execution, delivery and performance by the
Surety of this Termination Agreement and the consummation by the Surety of
the transactions contemplated by this Termination Agreement have been duly
authorized by all requisite corporate action on the part of each of the
Surety and no other corporate proceedings on the part of the Surety are
necessary to authorize this Termination Agreement or to consummate such
transactions.

(c)

Execution.
This Termination Agreement has been duly executed and delivered by the
Surety and constitutes the legal, valid and binding obligation of the
Surety, enforceable against it in accordance with its terms, except as
limited by laws affecting the enforcement of creditors rights
generally or by general equitable principles.

(d)

Consents.
No authorization, approval, consent, or order of, or a registration or
filing with, any court, governmental agency, or other third party is
required on the part of the Surety for the execution, delivery, and
performance of this Termination Agreement.

(e)

Conflicts.
The execution, delivery and performance of the Termination Agreement by
the Surety (i) will not violate any law or regulation applicable to
it or any order, writ or decree of any court or governmental agency by
which it or any of its property is bound, (ii) will not violate any
provision of the governing documents of the Surety; and (iii) will not
violate or constitute a default under any material agreement to which it
is a party or by which it or any of its property is bound.

10. Notices. All
notices, requests, demands, waivers and other communications required or
permitted to be given under this Termination Agreement shall be given to
the addressees and by the means provided in the Agreement and Surety Bond,
as applicable.

11. Binding
Effect. This Termination Agreement shall be binding upon and inure to
the benefit of the Parties and their respective heirs, successors and
permitted assigns.

12. Assignment;
Successors; Third-Party Beneficiaries.

(a)

This
Termination Agreement is not assignable by any Party without the prior
written consent of all of the other Parties and any attempt to assign this
Termination Agreement without such consent shall be void and of no effect.

(b)

This
Termination Agreement shall inure to the benefit of, and be binding upon
and enforceable by and against, the successors and permitted assigns of
the respective Parties, whether or not so expressed. Nothing in this
Termination Agreement, expressed or implied, is intended or shall be
construed to confer upon any person other than the Parties hereto and the
successors and assigns permitted by this Section 12(b), any right,
remedy or claim under or by reason of this Termination Agreement.

13. Amendment;
Waivers, etc.

(a)

No
amendment, modification or discharge of this Termination Agreement, and no
waiver under this Termination Agreement, shall be valid or binding unless
set forth in writing and duly executed by the Party against whom
enforcement of the amendment, modification, discharge or waiver is sought.
Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the
rights of the Party granting such waiver in any other respect or at any
other time. The waiver by any of the Parties of a breach of or a default
under any of the provisions of this Termination Agreement or to exercise
any right or privilege under this Termination Agreement, shall not be
construed as a waiver of any other breach or default of a similar nature,
or as a waiver of any of such provisions, rights or privileges under this
Termination Agreement.

(b)

The
rights and remedies in this Termination Agreement are cumulative and, except
as otherwise expressly provided herein, none is exclusive of any other, or
of any rights or remedies that any Party may otherwise have at law or in
equity.

14. Severability.
If any provision, including any phrase, sentence, clause, section or
subsection, of this Termination Agreement is invalid, inoperative or
unenforceable for any reason, such circumstances shall not have the effect
of rendering such provisions in question invalid, inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision in this Termination Agreement contained invalid, inoperative, or
unenforceable to any extent whatsoever; provided, however, that if any of
the provisions hereof are determined to be illegal, invalid or
unenforceable, the parties shall negotiate in good faith to modify this
Termination Agreement so as to effect the original intent of the parties
to the fullest extent possible.

15. Counterparts.
This Termination Agreement may be executed in several counterparts, each
of which shall be deemed an original and all of which shall together
constitute one and the same instrument.

16. Governing
Law. THE PROVISIONS OF THIS TERMINATION AGREEMENT AND THE RELATIONSHIP
OF THE PARTIES SHALL BE GOVERNED BY AND INTERPRETED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEBRASKA, WITHOUT REGARD TO
PRINCIPLES OF CHOICE OF LAWS, AND THE LAWS OF THE UNITED STATES OF
AMERICA. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR
INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS
TERMINATION AGREEMENT OR THE SURETY BOND SHALL BE LITIGATED IN COURTS
HAVING SITUS IN NEBRASKA.

17. Limitation
of Damages. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR
MEASURE OF DAMAGES IS PROVIDED IN THIS TERMINATION AGREEMENT, SUCH EXPRESS
REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY UNDER
THIS TERMINATION AGREEMENT, AND THE OBLIGORS LIABILITY SHALL BE
LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES
ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED IN
THIS AGREEMENT, THE OBLIGORS LIABILITY SHALL BE LIMITED TO DIRECT
ACTUAL DAMAGES ONLY, AND SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY UNDER THIS AGREEMENT, AND ALL OTHER REMEDIES OR DAMAGES
ARE WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
UNDER ANY PROVISION OF THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL,
PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES, IN TORT, CONTRACT, OR OTHERWISE.
TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO ANY PROVISION OF
THIS AGREEMENT IS AGREED BY THE PARTIES TO CONSTITUTE LIQUIDATED DAMAGES,
THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO
DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A REASONABLE APPROXIMATION OF
THE AMOUNT OF SUCH DAMAGES.

18. Certain
Defined Terms. As used in this Termination Agreement, the following
terms have the following meanings:

Claims
and Damages: means with respect to any releasing Party, all claims, actions, debts,
demands, accounts, judgments, rights, equitable relief, damages, costs, charges,
complaints, obligations, promises, agreements, controversies, expenses, compensation,
liability, responsibility, causes of action or suits of any kind whatsoever, at law or in
equity, in tort or contract, known or unknown, disclosed or undisclosed, past, present or
future.

Party:
means any of AMS, ILA, APEA or the Surety.

Related
Party: with respect to any person, its successors, assigns, subsidiaries and
affiliates (together with any present and former officers, directors, shareholders,
advisors (including financial advisors), employees, representatives, attorneys and agents
of each of the foregoing).

IN
WITNESS WHEREOF, the Parties have duly executed this Termination Agreement as of the date
first above written.